As average earnings grew by 3.9% in the year to July, and this exceeds both the rate of inflation and the 2.5% floor, this means pensions will rise by 3.9% next April as shown below:
Table 1. Pension rates in 2020/21 based on 3.9% uprating, assuming rounding up to nearest 5p
Note: The figure for married couples under the old state pension assumes that the wife claims a 60% pension based on her husband’s record.
But for pensioners over 75 there is a sting in the tail – next June those not on pension credit will be required to pay for a TV licence rather than receiving it for free. The current cost of a TV licence is £154.50 per year and will rise again next year. Royal London has calculated that, taking account of the loss of free TV licences, 1.7 million single pensioners over 75 will face a cut in their real living standards next year. This is because their pension increase, once the TV licence has been deducted, will be just 1.6% - lower than today’s rate of inflation which was 1.7%. This is shown in the Table:
Table 2. Single pensioners aged 75 or above – pension increase net of TV Licence increase
As Table 2 shows, once account is taken of the requirement to pay for a TV licence, a single pensioner over 75 only has an extra 1.6% next year – lower than today’s headline inflation figure. As a result, they will face a real-terms squeeze in their standard of living.
There are roughly 2.5 million single pensioners aged 75 or over. DWP data suggests around 800,000 pension credit recipients are single people aged 75 or over. Unless pension credit take-up improves markedly in response to the changes to TV licence funding, it seems likely that around 1.7 million single pensioners over 75 and not in receipt of pension credit will suffer a cut in their living standards next year.
Commenting, Steve Webb, Director of Policy at Royal London said: “The pension rise will be great news for those not affected by the TV licence changes. But there is a sting in the tail for around 1.7 million single people over 75 who will experience a squeeze in their standard of living once they have paid over £150 for a TV licence next year. This makes it all the more important that older pensioners check if they might be entitled to claim pension credit so that the poorest pensioners do not face this squeeze”.
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